xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2012

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____.

Commission File No. 000-22905

GOLDEN PHOENIX MINERALS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Nevada

41-1878178

(State or Other Jurisdiction

Of Incorporation or Organization)

(I.R.S. Employer Identification

Number)

7770 Duneville St., Suite 12, Las Vegas, Nevada

89139

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s telephone number, including area code (702) 589-7475

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.

Yes x

No ¨

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x

No ¨

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-3 of the Exchange Act. (Check one):

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨

Smaller reporting company

x

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.

Yes ¨

No x

As of November 14, 2012 there were 394,651,525 outstanding shares of the registrant’s common stock.

GOLDEN PHOENIX MINERALS, INC.

FORM 10-Q INDEX

QUARTER ENDED SEPTEMBER 30, 2012

Page Number

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets as of September 30, 2012 (Unaudited)

and December 31, 2011

3

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

for the Three Months and Nine Months Ended September 30, 2012 and 2011 (Unaudited)

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2012

2011

2012

2011

Rental income

$

7,800

$

67,800

$

33,700

$

133,400

Operating costs and expenses:

Exploration and evaluation expenses

84,081

3,145,071

314,283

10,286,650

General and administrative expenses

326,970

1,004,330

1,644,959

2,907,750

Depreciation and amortization expense

11,769

22,229

46,715

60,527

Cost of mining operations

-

-

-

78,170

Total operating costs and expenses

422,820

4,171,630

2,005,957

13,333,097

Loss from operations

(415,020

)

(4,103,830

)

(1,972,257

)

(13,199,697

)

Other income (expense):

Interest and other income

124

4

1,410

5,392

Interest expense

(7,928

)

(100,430

)

(517,701

)

(118,334

)

Foreign currency gain (loss)

13,306

(4,149

)

(58,661

)

(663

)

Impairment of marketable securities

(302,650

)

-

(302,650

)

-

Gain on disposition of property and equipment

13,516

-

13,077

50

Gain on disposition of interest in LLC

-

-

6,209,912

-

Gain on rescission of joint venture agreement

843,695

-

843,695

-

Gain on extinguishment of debt

-

10,677

-

30,677

Total other income (expense)

560,063

(93,898

)

6,189,082

(82,878

)

Income (loss) from continuing operations

before income taxes

145,043

(4,197,728

)

4,216,825

(13,282,575

)

Provision for income taxes

-

-

-

-

Income (loss) from continuing operations

145,043

(4,197,728

)

4,216,825

(13,282,575

)

Income from discontinued operations – gain

on sale of discontinued operations

-

-

-

192,285

Net income (loss)

145,043

(4,197,728

)

4,216,825

(13,090,290

)

Unrealized gain on marketable securities

51,400

-

139,200

-

Comprehensive income (loss)

$

196,443

$

(4,197,728

)

$

4,356,025

$

(13,090,290

)

Income (loss) per common share, basic and diluted:

Continuing operations

$

0.00

$

(0.01

)

$

0.01

$

(0.04

)

Discontinued operations

0.00

0.00

0.00

0.00

Total

$

0.00

$

(0.01

)

$

0.01

$

(0.04

)

Weighted average number of shares outstanding -

basic and diluted

394,236,133

327,840,504

383,156,011

304,389,948

See accompanying notes to condensed consolidated financial statements

4

GOLDEN PHOENIX MINERALS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended September 30,

2012

2011

Cash flows from operating activities:

Net income (loss)

$

4,216,825

$

(13,090,290

)

Adjustments to reconcile net income (loss) to net cash used in

operating activities:

Income from discontinued operations

-

(192,285

)

Depreciation and amortization expense

46,715

60,527

Amortization of debt issuance costs to interest expense

287,869

10,436

Foreign currency loss

48,900

-

Impairment of marketable securities

302,650

-

Gain on disposition of property and equipment

(13,077

)

(50

)

Gain on rescission of joint venture agreement

(500,000

)

-

Gain on disposition of interest in LLC

(6,209,912

)

-

Issuance of common stock for services

-

81,291

Issuance of common stock for exploration and evaluation expenses

-

1,158,500

Issuance of common stock and options in acquisition allocated to

exploration and evaluation expenses

-

5,946,498

Issuance of common stock for warrants exercised for exploration

and evaluation expenses

-

135,000

Issuance of warrants for services

57,829

734,870

Issuance of warrants for exploration and evaluation expenses

-

111,089

Gain on extinguishment of debt

-

(30,677

)

Stock-based compensation

-

202,745

Amounts due related parties for exploration and evaluation expenses

-

1,013,222

Changes in operating assets and liabilities:

Decrease in prepaid expenses and other current assets

83,524

64,387

Increase in accounts payable

795,589

126,008

Increase in accrued liabilities

212,499

137,955

Net cash used in operating activities

(670,589

)

(3,530,774

)

Cash flows from investing activities:

Purchase of property and equipment

(2,735

)

(38,181

)

Proceeds from the disposition of property and equipment

32,250

50

Net cash provided by (used) in investing activities

29,515

(38,131

)

Cash flows from financing activities:

Net proceeds from the sale of common stock

412,500

645,000

Proceeds from the exercise of warrants

-

105,000

Proceeds from the issuance of warrants

420,000

-

Proceeds from notes payable

-

2,750,000

Payment of debt issuance costs

(312,372

)

Payments of notes payable and long-term debt

(42,979

)

(1,053,648

)

Purchase of treasury stock

-

(79,804

)

Net cash provided by financing activities

789,521

2,054,176

Cash flows from discontinued operations – net cash provided by

operating activities

-

192,285

Net increase (decrease) in cash

148,447

(1,322,444

)

Cash, beginning of the period

154,607

1,520,318

Cash, end of the period

$

303,054

$

197,874

See accompanying notes to condensed consolidated financial statements

5

GOLDEN PHOENIX MINERALS, INC.

Notes to Condensed Consolidated Financial Statements

September 30, 2012

(Unaudited)

NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF FINANCIAL STATEMENT PRESENTATION

Golden Phoenix Minerals, Inc. (the “Company” or “Golden Phoenix”) is a mineral exploration and development company specializing in acquiring and consolidating mineral properties with potential production and future growth through exploration discoveries. The Company’s current growth strategy is focused on the expansion of its operations through the development of mineral properties into joint ventures and royalty mining projects.

The Company was formed in Minnesota on June 2, 1997. On May 30, 2008, the Company reincorporated in Nevada.

On April 14, 2011, the Company, through a wholly-owned subsidiary, Ra Minerals, Inc. (“Ra Minerals”), closed the acquisition of 100% of the issued and outstanding shares of Ra Resources Ltd., a corporation incorporated under the laws of the Province of Ontario. The accompanying condensed consolidated financial statements of the Company include the accounts of the Company and the accounts of Ra Minerals from April 14, 2011 forward. All intercompany accounts and balances have been eliminated in consolidation.

The interim financial information of the Company as of September 30, 2012 and for the three months and nine months ended September 30, 2012 and 2011 is unaudited, and the balance sheet as of December 31, 2011 is derived from audited financial statements. The accompanying condensed consolidated financial statements have been prepared in accordance with U. S. generally accepted accounting principles for interim financial statements. Accordingly, they omit or condense notes and certain other information normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles. The accounting policies followed for quarterly
financial reporting conform with the accounting policies disclosed in Note 2 to the Notes to Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011. In the opinion of management, all adjustments that are necessary for a fair presentation of the financial information for the interim periods reported have been made. All such adjustments are of a normal recurring nature. The results of operations for the three months and nine months ended September 30, 2012 are not necessarily indicative of the results that can be expected for the fiscal year ending December 31, 2012. The unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31,
2011.

Certain amounts in the condensed consolidated financial statements for the three months and nine months ended September 30, 2011 have been reclassified to conform to the current period presentation.

NOTE 2 – GOING CONCERN

The consolidated financial statements of the Company are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has a history of operating losses since its inception in 1997, and has an accumulated deficit of $61,361,336 and a total stockholders’ deficit of $2,676,086 at September 30, 2012. A significant portion of these deficits resulted from the Company’s accounting policy of expensing exploration mineral property acquisition costs, including costs expended to acquire
interests in joint ventures with mineral properties in the exploration and evaluation stage, due to the uncertainty as to the recoverability of these costs. The Company’s only source of operating revenues for the past several months has been the occasional rental of drilling equipment. Currently, none of the Company’s mineral property prospects have proven or probable reserves. The Company will require additional capital to fund its operations and to pursue mineral property development opportunities with its existing properties and other prospects.

6

As more fully described in these Notes to Condensed Consolidated Financial Statements and elsewhere in this quarterly report, the Company currently owns or recently has entered into options and agreements for the acquisition of various mineral properties. None of these mineral properties currently have proven or probable reserves. The Company will be required to raise significant additional capital to complete the acquisition of the interests in and further the exploration, evaluation and development of each of these mineral properties. There can be no assurance that the Company will be successful in raising the required capital or that any of these mineral properties
will ultimately attain a successful level of operations.

In September 2011, the Company entered into a senior, secured gold stream debt facility for up to $15.5 million (the “Gold Stream Facility”), secured by substantially all assets of the Company, with Waterton Global Value, L.P. (“Waterton”). On January 24, 2012, the Company received a Notice of Default and Acceleration, and subsequently received supplemental Notices of Default, and a Notice of Disposition of Collateral from Waterton under the Gold Stream Facility. The Company refuted each assertion of default. Through April 30, 2012, the Company had borrowed an aggregate principal amount of $6,000,000 from the Gold Stream Facility. On
April 30, 2012, the Company’s 30% interest in Mineral Ridge Gold, LLC (the “Mineral Ridge LLC”) was foreclosed upon by Waterton and sold at a public auction, at which the only bidder present was Waterton. The Company’s interest in the Mineral Ridge LLC was sold to Waterton and indebtedness to Waterton with a total book value of $6,209,912 was extinguished.

Effective July 23, 2012 and subsequently amended effective July 30, 2012, the Company entered into a Rescission and Release Agreement (the “Rescission Agreement”) with Silver Global, S.A. (“Silver Global”) and Golden Phoenix Panama, S.A. (the “JV Company”) (collectively the “Parties”) whereby the Parties agreed to resolve outstanding disputes and rescind the Definitive Acquisition Agreement entered into on September 16, 2011 to develop the Santa Rosa mining project in Panama. In accordance with the terms of the Rescission Agreement, Silver Global is to return and pay to the Company a total of $4,100,000 in scheduled payments over twelve
months, subject to a discount of $750,000 as consideration for timely payments, and return to the Company for cancellation 25,000,001 shares of the Company’s common stock. The Company is to transfer its 15% ownership interest in the JV Company to Silver Global via release of the Company’s fifteen (15) shares of JV Company common stock (the “Panama Shares”), to be released in tranches concurrent with the scheduled payments over twelve months. The Company received the first payment from Silver Global of $350,000; however, there can be no assurance that the Company will receive the remaining payments from Silver Global as scheduled in the Rescission Agreement. In the event of any default in payment by Silver Global, the Company will maintain any unpaid portion of the Panama Shares.

Because of the negative impact of recent disputes and litigation on the Company’s fund raising efforts, including the foreclosure and sale of its interest in the Mineral Ridge LLC and the rescission of the joint venture in Panama, capital has generally not been available to continue mineral property exploration and evaluation activities and fund operations in the current year. There can be no assurance that the Company will be successful in its efforts to obtain financing, or that it will be successful in its efforts to continue to raise capital at favorable rates or at all. If the Company is unable to raise sufficient capital to pay its obligations, or the Company and its
joint venture partners are unable to successfully complete the development of current mineral projects and obtain profitable operations and positive operating cash flows, the Company may be forced to scale back its mineral property acquisition and development plans or to significantly reduce or terminate operations and file for reorganization or liquidation under the bankruptcy laws. These factors together raise doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

7

NOTE 3 – MINERAL PROPERTIES

As of September 30, 2012, the Company held interests in or had plans to pursue the mineral property opportunities discussed below. These exploration projects currently do not have proven or probable reserves.

Nevada Properties and Projects

Duff Claims Block, Humboldt County, Nevada

The Company owns the Duff claims block comprised of 103 mineral claims located along the western flank of the Pine Forest Range, 20 miles south of Denio, Humboldt County, Nevada. The claims block, which was acquired in 2007, extends from Oakly Canyon south of the Ashdown Mine to the border of the Blue Lake Wilderness Study Area. Metals historically mined in the general region include gold, molybdenum, copper, tungsten, and antimony.

The major mine feature of the Duff claims is the Adams Mine, which at one time produced silica. However, there are historical reports that substantial gold was also extracted from the quartz rock. Gold has also been mined in the Vicksburg, Ashdown, and Cherry Creek canyons to the north, and Leonard Canyon to the south of the Duff claims.

The Company received a notification from an individual claiming overlapping ownership and priority of certain claims comprising the Duff claims block and Adams Mine. The Company is looking into the facts surrounding the potential dispute. Although the Company does not anticipate a material change as a result of this matter, the Company may be required to revise its description of its claim holdings or expend additional funds to maintain the interest it currently believes it holds.

The Duff claims block has no historical cost basis to the Company for accounting purposes; therefore, no amounts related to this mineral property are included in the accompanying condensed consolidated financial statements.

Agreement to Purchase 80% Interest in Vanderbilt and Option to Acquire 80% Interest in Coyote Fault and Coyote Extension Properties, Esmeralda County, Nevada

In July 2010, the Company entered into two separate agreements with Mhakari Gold (Nevada), Inc. (“Mhakari”), an Asset Purchase Agreement and an Option Agreement, which provide the Company the ability to acquire an 80% interest in each of the historic Vanderbilt silver/gold mine and Coyote Fault gold and silver project, both in Esmeralda County, Nevada. Subsequently, in July 2011, we entered into an Option Agreement with Mhakari to acquire an 80% interest in that certain property referred to as the “Coyote Extension” that extends and augments the Coyote Fault property. The Company entered into an Asset Purchase Agreement to acquire an 80% interest in the
Vanderbilt property in consideration for the issuance of 2,000,000 shares of its common stock as well as warrants to purchase a further 2,000,000 shares of its common stock with an exercise price of $0.05 per share exercisable for a period of five years, with a forced conversion at the Company’s option in the event its 200-day volume weighted average price equals $0.15 per share. The Company obtained its option to acquire an 80% interest in Coyote Fault in consideration for the issuance of 5,000,000 shares of our common stock as well as warrants to purchase a further 5,000,000 shares of its common stock with an exercise price of $0.05 per share exercisable for a period of five years with the same forced conversion feature. In addition, to earn its 80% interest in each property, the Company is required to expend no less than $150,000 in exploration and
development expenditures in the first 12 months on the Coyote Fault property, $350,000 in exploration and development expenditures on the Vanderbilt property over a 48 month period, and a combined minimum of $1,500,000 on both the Coyote Fault and Vanderbilt Properties.

To exercise its option for the Coyote Extension property, the Company must fulfill certain conditions and make certain payments to Mhakari as follows: (i) upon signing the Option Agreement, $85,000 cash payment, which amount was satisfied through the exercise by Mhakari of 1,700,000 out of the aggregate total 7,000,000 Company common stock purchase warrants held by Mhakari (“Existing Warrants”) at an exercise price of $0.05 per share; (ii) upon signing the Option Agreement, issuance of 1,500,000 shares of the Company’s common stock and warrants to purchase a further 1,500,000 shares of Company common stock
at an exercise price of $0.15 per share exercisable for a period of two years, which warrants contain a forced conversion provision in the event the moving average price of a share of the Company’s common stock reaches or exceeds $0.30 for a period of 65 consecutive trading days or more, as quoted by the OTCBB; and (iii) within 48 months of signing the Option Agreement, the Company shall be required to expend no less than an additional $250,000 in exploration and development expenditures on the Coyote Extension (or at the Company’s discretion, on the Coyote Fault or Vanderbilt properties). Further, Mhakari agreed, within two months of signing the Coyote Extension Agreement, to expend $250,000 in cash to the Company to exercise five million of its remaining warrants to acquire Company shares (the “Warrant Exercise”). Through September 30,
2012, Mhakari had exercised 3,000,000 warrants.

8

Further, upon satisfaction of certain of the above-referenced milestones (namely, issuances of shares, warrants, and initial expenditure obligations), the Company will receive a 51% interest in the properties in the form of a joint venture with Mhakari, such 51% interest to automatically increase to 80% upon satisfaction of the overall exploration and development expenditure obligation. Although the Company anticipates completing its obligations necessary to finalize the acquisition of an 80% interest in both properties, there can be no assurance that funds will be available or that the Company will consummate the purchase or the option and earn its full 80% interest in each
property.

Vanderbilt

The Vanderbilt property is within 4 miles of the town of Silver Peak, Nevada and highway 265 via Coyote Road. It is comprised of 44 claims, plus 3 patented claims and is located on the southern flank of Mineral Ridge and is within the Silver Peak Range. The Vanderbilt property is within the middle of the Walker Lane tectonic belt with the Sierra uplift to the west and the Basin and Range to the east. Phase I geologic mapping and outcrop sampling (above ground) was completed in October 2010, resulting in average grades of 2.1 g/t gold and 58.6 g/t silver. Phase II exploration program (below ground) in the old mine workings was commenced during the first
quarter of 2011 to help identify drill targets, with an exploratory drill program expected to begin in the near term as funding permits.

Coyote Fault

The Coyote Fault/Coyote Fault Extension claims are within nine miles of Silver Peak, Nevada and Hwy 265 via Coyote Road. They are comprised of 110 contiguous claims and are also located in the middle of the Walker Lane tectonic belt with Sierra Block uplift to the west and the Basin and Range to the east. The property is on the northern flank of Mineral Ridge and is along the eastern edge of the Silver Peak Range. Phase I geologic mapping and outcrop sampling (above ground) was completed on the Coyote Fault claim group (38 claims) in December, 2010, which identified a new potential gold exploration target. Geological mapping of the Coyote Extension claim group (72
claims) is planned for the near term as funding permits.

At September 30, 2012, the Company had only partially met its obligation to expend no less than $150,000 in exploration and development expenditures in the first 12 months on the Coyote Fault property and Mhakari had not completed the Warrant Exercise under the Coyote Extension Agreement. The Company is in discussion with Mhakari regarding this and other matters.

9

Canadian Properties and Projects

Northern Champion Property, Ontario, Canada

The Northern Champion property consists of approximately 880 acres in Griffith and Brougham Townships in the Province of Ontario, Canada (“Northern Champion Property”). On April 18, 2006, the Company executed a Purchase Agreement with four individuals (collectively, the “Vendors”) to acquire 5 registered claims totaling 22 units on the Northern Champion Property together with a NI 43-101 Technical Report and Feasibility Study describing a molybdenite deposit within the area of the claims. The agreement reserved a collective 3.3% Net Smelter Return (“NSR”) for the Vendors on the sales of minerals taken from the Northern Champion Property. The
Company will have the right of first refusal to purchase 1.65% of said NSR from the Vendors for $1,650,000. As of February 2007, the Company completed all of its payment obligations under the Purchase Agreement and accordingly now owns 100% of the Northern Champion Property subject to the NSR reserved by the Vendors.

In the last quarter of 2010 and during 2011, the Company began mapping the geologic surface features and topography of the Northern Champion Property, into a single, regional metric scale map, in preparation to advance this molybdenum property. Once the mapping is complete and as funding allows, the Company expects to begin Phase II planning for trenching, geochemical sampling and/or drilling of previously identified zones to the east of the current open-cut mine. An IP (induced polarization) anomaly to the north of the open-cut zone is also expected to be investigated.

North Williams Township Option Agreement

On March 1, 2011, the Company entered into an option agreement with four individuals to acquire a 100% undivided interest in 61 unpatented mining claim units in North Williams Township in the Province of Ontario, Canada. In order to maintain in force the working right and option granted to it, the Company must make the following payments to the optionors: down payment on signing the option agreement – cash payment of $20,000 and 100,000 shares of the Company’s common stock (which payment was made in March 2011 with a total value of $18,500 assigned to the common shares issued); 12 months from signing – cash payment of $40,000 and 100,000 shares of the Company’s
common stock; 24 months from signing – cash payment of $80,000 and 100,000 shares of the Company’s common stock; and 36 months from signing – cash payment of $160,000 and 100,000 shares of the Company’s common stock.

Shining Tree Properties, Ontario, Canada

The mineral properties purchased in the Ra Resources acquisition in April 2011 are located within the Shining Tree District in Northern Ontario. The historic Shining Tree area is currently undergoing a resurgence of exploration where five other companies have been preparing and engaging in drill programs.

Peru Property Interests

During 2011, the Company executed and amended certain agreements pursuant to which the Company will acquire a 100% interest in certain gold and molybdenum properties in Peru, including: the Porvenir tungsten molybdenum stockpile, the Porvenir tungsten molybdenum exploration property (collectively, the “Porvenir Properties”), the Alicia gold exploration area near and abutting Porvenir and two large gold exploration plays in the Pataz District, Group of the Eight and the Tornitos (collectively, the “Gold Properties”) (the Porvenir Properties and Gold Properties are collectively referred to herein as the “Peru Properties”). The Peru Properties total
approximately 6,200 hectares of prospective exploration ground, or approximately 25 square miles.

10

The Company is currently in the process of finalizing necessary transfer agreements to be filed with Peruvian governmental authorities to affect the transfer and discussing other terms and conditions with the vendor of such Peru Properties. The Company anticipates finalizing such transfer agreements and related matters in the near term.

Mina Santa Rosa

During the year ended December 31, 2011, extensive efforts were directed toward the acquisition and advancement of the Santa Rosa, Panama project. The Santa Rosa gold deposit is located near the city of Cañazas in Veraguas Province, Panama, approximately 300 kilometers southwest of Panama City. On July 9, 2011, the Company entered into a letter of intent with Silver Global, S.A. (“Silver Global”) to acquire an interest in the Santa Rosa gold mine (“Santa Rosa” or “Mina Santa Rosa”). On September 16, 2011, the Company entered into a Definitive Acquisition Agreement to acquire a 60% interest, with an option to buy an additional
20% interest, in the Santa Rosa gold mine, via ownership in Golden Phoenix Panama S.A. (the “JV Company”), in consideration for $20,500,000 in cash over a period of approximately 12 to 15 months (with the final earn-in to occur upon achieving commercial production) and $4,500,000 in shares of the Company’s common stock (at an agreed upon value of $0.18 per share). The Company and Silver Global subsequently completed a Joint Venture Operating Agreement and effected transfer of all concessions to JV Company. The Company made payments in the aggregate amount of $4,500,000 in cash and issued 25,000,001 shares of its common stock in consideration for a 15% interest in the JV Company.

Effective July 23, 2012 and subsequently amended effective July 30, 2012, the Company entered into a Rescission and Release Agreement (the “Rescission Agreement”) with Silver Global and the JV Company (collectively the “Parties”) whereby the Parties agreed to resolve their disputes and rescind the Definitive Acquisition Agreement.

In accordance with the terms of the Rescission Agreement, Silver Global is to return and pay to the Company a total of $4,100,000 in scheduled payments over twelve months, subject to a discount of $750,000 as consideration for timely payments, and return to the Company for cancellation 25,000,001 shares of the Company’s common stock. The Company is to transfer its 15% ownership interest in the JV Company to Silver Global in tranches concurrent with scheduled payments. In the event of any default in the scheduled payments, the Company will keep the unpaid portion of the 15% interest. Further, as part of the
Rescission Agreement, all rights and obligations of the parties under the Santa Rosa Acquisition Agreement were immediately terminated, including the extinguishment of the outstanding loan for $500,000 payable to Silver Global.

Concurrent with the execution of the Rescission Agreement and the receipt of the first payment by the Company of $350,000 on August 8, 2012, the arbitration proceedings previously filed by the Company against Silver Global and pending before the International Chamber of Commerce were dismissed, without prejudice. As a result of the $350,000 payment from Silver Gloval and the extinguishment of the $500,000 note payable, less related bank and legal fees of $6,305, the Company recorded an $843,695 gain on rescission of the joint venture.

Subsequent to September 30, 2012, Silver Global returned to the Company the 25,000,001 shares of the Company’s common stock (Note 18).

11

Exploration and evaluation expenses included in the Company’s condensed consolidated statements of operations and comprehensive loss were comprised of expenses incurred for the following exploration mineral properties opportunities:

Three Months Ended

September 30,

Nine Months Ended

September 30,

2012

2011

2012

2011

Mina Santa Rosa

$

-

$

1,250,000

$

64,516

$

1,250,000

Peru Properties

-

1,373,995

-

1,894,721

Molyco

-

-

-

200,000

Mhakari Properties

-

386,089

-

436,089

Shining Tree Mining District

-

47,432

-

6,160,727

North Williams Township

-

-

-

39,055

Other

84,081

87,555

249,767

306,058

Total

$

84,081

$

3,145,071

$

314,283

$

10,286,650

NOTE 4 – ACQUISITION OF RA RESOURCES, LTD

On October 6, 2010, the Company entered into a definitive Acquisition Agreement (“Acquisition Agreement”) between the Company, Ra Resources Ltd., a corporation incorporated under the laws of the Province of Ontario (“Ra”) and 2259299 Ontario Inc., a corporation incorporated under the laws of the Province of Ontario and a wholly-owned subsidiary of the Company formed for the purpose of effecting the transactions contemplated by the Acquisition Agreement (“Newco”). On April 14, 2011, the Company closed the Acquisition Agreement whereby the Company acquired 100% of the outstanding common shares of Ra by way of a “three-cornered amalgamation” in
accordance with the Ontario Business Corporations Act (the “Acquisition”). Based on an agreed upon 3.5 for 1 exchange ratio, the Company issued a total of 32,642,831 shares of its common stock to the Ra shareholders. Further, the Company assumed and exchanged, based on the 3.5 for 1 exchange ratio, 200,000 issued and outstanding options to acquire common shares of Ra Resources at an exercise price of $0.10 per share, which were canceled in exchange for the issuance by the Company of an aggregate of 700,000 options to acquire shares of Company common stock at an exercise price of approximately $0.03 per share. As mutually agreed upon by the parties, the Company also issued 3,264,283 shares of its common stock to a non-related third party as a 10% finder’s fee for introducing the Acquisition.

The principal assets of Ra are four gold and base metal properties in the Shining Tree District in Ontario, Canada which are in the exploration stage and have no proven or probable ore reserves. The Company also assumed certain outstanding obligations of Ra totaling $266,502 related to ongoing maintenance and working capital expenditures during the period between execution of the Acquisition Agreement and its closing. The accompanying condensed consolidated financial statements of the Company include the accounts of the Company and the accounts of Ra Minerals from April 14, 2011 forward.

NOTE 5 – MARKETABLE SECURITIES

The Company’s marketable securities consist of 1,250,000 shares of American Mining Corporation common stock (“AMC”) and the 3,000,000 shares of Win-Eldrich Mines Ltd (“WEX”) common stock received in the settlement of a promissory note in October 2011. The marketable securities are stated at market value, with market value based on market quotes. The Company has classified these marketable securities as securities held-for-sale in accordance with ASC Topic 320, Investments – Debt and Equity Securities. Unrealized gains and losses resulting from changes in market value were
recorded as other comprehensive income, a component of stockholders’ equity in the Company’s condensed consolidated balance sheet.

12

On May 9, 2012, trading of WEX common shares was halted on the Toronto Stock Exchange due to WEX not timely filing its annual report and audited financial statements. Unless this trading suspension is resolved by WEX and a market for the WEX common shares develops, the ability of the Company to realize the book value of its investment in WEX common shares is uncertain.

After considering several factors, including the nature of the operations of AMC and WEX, the trading volume of the shares and the number of shares held by the Company, we have concluded that an impairment loss for the marketable securities should be recorded for the quarter ended September 30, 2012, and that the impairment loss is other-than-temporary. Therefore, we have recorded an impairment loss for the marketable securities of $302,650 for the quarter ended September 30, 2012.

In accordance with ASC Topic 820, Fair Value Measurements and Disclosure, the Company categorizes its financial assets and liabilities that it measures on a recurring basis into a three-level fair value hierarchy as defined in the standard. Marketable securities held at September 30, 2012 are the only financial instruments that the Company currently measures on a recurring basis. The following table summarizes the Company’s financial assets measured on a recurring basis as of September 30, 2012:

Description

Quoted Prices in

Active Markets for

Identical Assets (Level 1)

Significant Other

Observable

Inputs (Level 2)

Significant

Unobservable

Inputs (Level 3)

Marketable Securities

$

302,650

$

-

$

-

In accordance with ASC Topic 830, Foreign Currency Matters, the increase or decrease in the recorded value of the marketable securities resulting from changes in foreign exchange rates between the Company’s functional currency, the US dollar, and the currency in which the marketable securities are denominated, the Canadian dollar, is recorded as a foreign currency transaction gain or loss in the Company’s consolidated statements of operations. The foreign currency gain related to these securities was $22,200 for the three months ended September 30, 2012 and the foreign currency loss related to these securities was $48,900
for the nine months ended September 30, 2012.

On September 26, 2011, the Company entered into a Senior Secured Gold Stream Credit Agreement with Waterton Global Value, L.P. (previously defined as “Waterton”), whereby Waterton agreed to advance the Company up to $15,500,000 (the “Commitment Amount”) in five separate tranches (the “Gold Stream Facility”) to further the Company’s acquisition of an interest in the Mina Santa Rosa property. The Gold Stream Facility was secured by all assets of the Company, including a pledge of the Company’s membership interest in the Mineral Ridge LLC, all as evidenced by that certain Amended and Restated Security Agreement and Amended and Restated Pledge
Agreement, each entered into by the parties as of September 26, 2011.

In accordance with the terms of the Gold Stream Facility, that portion of the Commitment Amount borrowed (at any given time, the amount outstanding referred to as the “Principal Amount”) is payable by the Company to Waterton in monthly payments which were to commence in March 2012 for a period between two and eighteen months depending on the amount borrowed. The first tranche of funding in the amount of $1,750,000, which included repayment of a $1 million Bridge Loan, closed simultaneous with entering into the Gold Stream Facility. On November 2, 2011 the Company borrowed $4,250,000 from the second tranche of funding, netting approximately $4,095,000 after payment of
fees and expenses.

Repayments were to commence in March 2012 and, if made in cash, were to be in monthly repayment amounts of $750,000 for each of the first four tranches borrowed. Upon borrowing tranche five, repayments would have consisted of eight monthly payments of $750,000 and ten monthly payments of $950,000. Monthly repayment amounts were also to consist of a profit participation amount based on the spot price of gold.

In connection with the Gold Stream Facility, the Company affirmed Waterton’s option, pursuant to an Amended and Restated Option Agreement, to purchase the Company’s interest in the Mineral Ridge LLC, which option, along with the Company’s grant of a security interest in its ownership of the Mineral Ridge LLC, were simultaneously consented to by Scorpio Gold Corporation, the majority partner at Mineral Ridge.

On January 24, 2012, the Company received a Notice of Default and Acceleration, and subsequently received supplemental Notices of Default, and a Notice of Disposition of Collateral from Waterton under the Gold Stream Facility. The Company refuted each initial assertion of default. Notwithstanding, on April 30, 2012, the Company’s 30% interest in Mineral Ridge Gold, LLC (the “Mineral Ridge LLC”) was foreclosed upon by Waterton and sold at a public auction, at which the only bidder present was Waterton. The Company’s interest in the Mineral Ridge LLC was sold to Waterton for a credit bid of $9,035,321, which amount is claimed by Waterton as owed
by the Company under the Gold Stream Facility, including alleged penalties and interest.

Through April 30, 2012, the date of the foreclosure and sale, the Company had borrowed $6,000,000 in principal and had accrued interest expense of $209,912. The total of these amounts, $6,209,912, has been recorded as the sales proceeds for the interest in the Mineral Ridge LLC, resulting in a gain in the same amount recorded in the nine months ended September 30, 2012 since the Company had no book value recorded for its investment in the Mineral Ridge LLC.

The facts and circumstances surrounding the alleged default that resulted in the foreclosure and sale of the Company’s interest in the Mineral Ridge LLC were matters in dispute and the subject of litigation filed by the Company against Waterton and Scorpio Gold Corporation, a participant in the Mineral Ridge Joint Venture. On July 11, 2012, the Company announced that it, Waterton, and Scorpio Gold Corporation entered into a settlement agreement to discontinue the litigation and to fully release each other from any claims or possible claims relating to the litigation.

14

NOTE 8 – NOTES PAYABLE

The Company’s notes payable and current portion of long-term debt consists of the following at:

September 30,

2012

December 31,

2011

Capital lease payable to Heartland Wisconsin Corp.,

payable at $1,148 per month through May 2013,

secured by equipment

$

8,839

$

18,088

Note payable to Komatsu Equipment Company, with

principal payments of $58,486 on June 30, 2008,

$58,486 on June 30, 2009, and $58,485 on June 30, 2010,

with interest at 8%, unsecured

175,457

175,457

Convertible note payable to SV, non-interest bearing,

payable September 30, 2012

500,000

500,000

Convertible note payable to SV, non-interest bearing,

payable September 30, 2012

413,223

413,223

Note payable to Pinnacle, non-interest bearing, payable in

scheduled monthly payments ranging from $15,000 to

$30,000 through August 2012

190,000

220,000

Convertible note payable to Pinnacle, non-interest bearing,

payable October 31, 2013

250,000

250,000

Note payable to Silver Global, non-interest bearing, payable

January 31, 2012

-

500,000

Other

-

3,730

Accrued interest payable

73,692

63,164

Total

1,611,211

2,143,662

Less current portion

1,361,211

1,888,067

Long-term portion

$

250,000

$

255,595

The two convertible notes payable to Sala-Valc S.A.C., a Peruvian corporation (“SV”), resulted from an Amendment to Mining Asset Purchase and Strategic Alliance Agreement related to the Peru Properties (Note 3).

The two notes payable to Pinnacle Minerals Corporation (“Pinnacle”) resulted from an Amendment to Membership Interest Purchase Agreement whereby the Company purchased Pinnacle’s membership interest in Molyco, LLC, which owns or controls portions of the Peru Properties (Note 3).

The note payable to Silver Global, SA, a Panamanian corporation (“Silver Global”), resulted from a loan agreement, amended as of December 30, 2011, whereby Silver Global agreed to loan the Company a portion of the funds paid by the Company to Silver Global to purchase ownership in the Mina Santa Rosa (Note 3). Such note payable was subsequently extinguished and is no longer an obligation of the Company as a result of the rescission of the Definitive Acquisition Agreement with Silver Global.

15

NOTE 9 – AMOUNTS DUE RELATED PARTIES AND SETTLEMENT AGREEMENT

Amounts due to related parties include a note due to Robert P. Martin, Chairman of the Company’s Board of Directors resulting from a debt settlement agreement entered into in April 2010. The repayment terms of the note were restructured as part of a consulting agreement entered into with Mr. Martin effective September 1, 2011. The obligation was paid 50% in November 2011, with the remaining 50% payable on or before February 27, 2012 (not yet paid at September 30, 2012). At September 30, 2012, amounts due related parties totaled $120,821, comprised of note principal of $115,066 and accrued interest payable of $5,755. At December 31, 2011, amounts due
related parties totaled $115,671, comprised of note principal of $115,066 and accrued interest payable of $605.

NOTE 10 – STOCKHOLDERS’ EQUITY

The Company authorized 50,000,000 shares of no par value, non-voting convertible preferred stock. In 1997, the Company’s Board of Directors authorized the designation of a class of preferred stock convertible into ten shares of common stock for each share of preferred stock at a conversion rate of $0.10 per common share for a period of ten years from June 12, 1997. The Company did not determine any dividend rights, dividend rates, liquidation preferences, redemption provisions, and other rights, preferences, privileges and restrictions. At the date of this action and as of September 30, 2012 and December 31, 2011, there were no shares of preferred stock
outstanding.

The Company also has authorized 800,000,000 shares of $0.001 par value common stock.

During the nine months ended September 30, 2012, the Company issued a total of 26,617,377 shares of its common stock, including: 24,136,364 shares for cash of $412,500 ($425,000 less $12,500 in finder’s fees) and 2,481,013 shares issued upon cashless exercise of warrants recorded at par value of $2,481.

On July 10, 2012, concurrently with the execution of the settlement agreement with Waterton Global Value, LP. described in Note 15, the Company completed a private placement with an institutional investor, consisting of the issuance of six million warrants, to purchase an equivalent number of shares of the Company’s common stock in consideration for a purchase price of $400,000. Two million of the warrants will be exercisable for $0.04 per warrant share and the remaining four million warrants exercisable at $0.08 per warrant share. These warrants are exercisable for a period of five years from date of issuance, through July 10, 2017.

In April 2012, an investor purchased a warrant for $20,000, entitling the investor to purchase 2,000,000 shares of common stock at an exercise price of $0.04 per share, exercisable for a period of two years.

On September 28, 2010, the Company announced that its Board of Directors approved a Stock Repurchase Program, permitting the Company to repurchase up to an aggregate of 20% of its outstanding common stock over the next 12 months. The repurchases will be made from time to time in the open market at prevailing market prices or in negotiated transactions off the market. The Stock Repurchase Program may be extended beyond 12 months or shortened by the Board of Directors.

As of September 30, 2012, the Company had 415,392 shares of its common stock acquired in the Stock Purchase Program that were recorded as treasury shares at a cost of $49,008.

16

NOTE 11 – STOCK WARRANTS

A summary of the status of the Company’s stock warrants as of September 30, 2012, and changes during the six months then ended is presented below:

Weighted

Average

Shares

Exercise Price

Outstanding, December 31, 2011

40,333,333

$

0.14

Granted

21,750,000

$

0.05

Canceled / Expired

(2,000,000

)

$

0.06

Exercised

(4,000,000

)

$

0.03

Outstanding, vested and exercisable

September 30, 2012

56,083,333

$

0.11

In January 2012, the Company issued warrants to an investor to purchase a total of 4,000,000 shares of the Company’s common stock in connection with the issuance of common stock for cash. The investor subsequently exercised the warrants and received 2,481,013 shares of common stock in a cashless exercise.

In connection with the issuance of common stock for cash in February 2012, the Company issued a warrant to an investor for the purchase of 2,500,000 shares of common stock at an exercise price of $0.06 per share, exercisable for a period of five years.

In connection with the issuance of common stock for cash in April 2012, the Company issued a warrant to an investor for the purchase of 4,000,000 shares of common stock at an exercise price of $0.04 per share, exercisable for a period of two years.

In connection with the issuance of common stock for cash in April 2012, the Company issued a warrant to an investor for the purchase of 2,500,000 shares of common stock at an exercise price of $0.04 per share, exercisable for a period of two years.

In April 2012, an investor purchased a warrant for $20,000, entitling the investor to purchase 2,000,000 shares of common stock at an exercise price of $0.04 per share, exercisable for a period of two years.

During the nine months ended September 30, 2012, the Company issued a consultant warrants to purchase a total of 750,000 shares of the Company’s common stock. The warrants are exercisable for a period of two years at an exercise price of $0.125 per share.

In a private placement in July 2012, an investor purchased two five-year warrants for $400,000, entitling the investor to purchase 2,000,000 shares of common stock at an exercise price of $0.04 per share and 4,000,000 shares of common stock at an exercise price of $0.08 per share.

NOTE 12 – STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation – Stock Compensation. Under the fair value recognition provisions of this standard, stock based compensation cost is measured at the grant date based on the value of the award granted, using the Black-Scholes option pricing model, and recognized over the period in which the award vests. The stock-based compensation expense included in general and administrative expenses for the three months ended September 30, 2012 and 2011 was $0 and $187,677,
respectively, and $0 and $202,745 for the nine months ended September 30, 2012 and 2011, respectively. There was no stock compensation expense capitalized during the three months and nine months ended September 30, 2012 and 2011.

17

During the nine months ended September 30, 2012, the Company granted to a director stock options to purchase 100,000 shares of the Company’s common stock at an exercise price of $.0149 per share. The Company estimated the weighted average grant-date fair value of these options at $0.013 per share using the Black-Scholes option pricing model with the following assumptions:

Expected dividend yield

0.00

%

Expected stock price volatility

136.86

%

Risk-free interest rate

.82

%

Expected life of option

5.0 years

The following table summarizes the stock option activity during the nine months ended September 30, 2012:

Options

Weighted

Average

Exercise

Price

Weighted

Average

Remaining

Contract Term

Aggregate

Intrinsic

Value

Outstanding at December 31, 2011

8,930,000

$

0.11

Granted

100,000

$

0.01

Exercised

-

Expired or cancelled

(1,180,000

)

$

0.11

Outstanding, vested and exercisable

at September 30, 2012

7,850,000

$

0.11

3.20

$

-

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the Company’s closing stock price of $0.01 as of September 30, 2012 which would have been received by the holders of in-the-money options had the option holders exercised their options as of that date.

As of September 30, 2012, there was no future compensation cost related to non-vested stock-based awards not yet recognized in the condensed consolidated statements of operations.

NOTE 13 – EARNINGS (LOSS) PER SHARE

The computation of basic earnings per common share is based on the weighted average number of shares outstanding during the period. The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the period plus the weighted average common stock equivalents which would arise from the exercise of stock options, warrants and rights outstanding using the treasury stock method and the average market price per share during the period.

A reconciliation of the number of shares used in the computation of the Company’s basic and diluted earnings per common share is as follows:

18

Three Months Ended

September 30,

Nine Months Ended

September 30,

2012

2011

2012

2011

Weighted average number of common

shares outstanding

394,236,133

327,840,504

383,156,011

304,389,948

Dilutive effect of:

Stock options

-

-

-

-

Warrants

-

-

-

-

Weighted average number of common

shares outstanding, assuming dilution

394,236,133

327,840,504

383,156,011

304,389,948

No stock options and warrants are included in the computation of diluted weighted average number of shares for the three months and nine months ended September 30, 2012 and 2011 because the effect would be anti-dilutive. At September 30, 2012, the Company had outstanding options and warrants to purchase a total of 63,933,333 common shares of the Company that could have a future dilutive effect on the calculation of earnings per share.

NOTE 14 – CONSULTING AGREEMENTS

Thomas Klein

On October 4, 2010, the Company entered into a Consulting Agreement effective September 1, 2010 (the “Klein Consulting Agreement”) with Thomas Klein, whereby Mr. Klein is to provide services to the Company in his role as Chief Executive Officer (“CEO”) of the Company. Mr. Klein was appointed as the Company’s CEO effective as of February 1, 2010.

As compensation for providing such consulting services in his capacity as CEO, the Company agreed to pay Mr. Klein $165,000 per year as well as provide a $96,250 payment upon signing the Consulting Agreement. Mr. Klein’s compensation will be reviewed annually by the Company’s Compensation Committee, or by the full Board of Directors serving in such capacity. The Consulting Agreement has a 2-year term with automatic 1-year renewal periods unless earlier terminated upon notice or for cause as provided in the Consulting Agreement, and allows for Mr. Klein to participate in certain Company incentive and benefit plans.

Effective July 1, 2011, the Compensation Committee approved an increase in Mr. Klein’s annual compensation to $250,000 per year. During the quarter ended September 30, 2012, the Board elected not to renew the Klein Consulting Agreement.

Robert P. Martin

Effective as of September 30, 2011, the Company and Mr. Martin, entered into and declared effective a Consulting Agreement dated September 1, 2011, together with an Amendment to Consulting Agreement dated September 28, 2011 (collectively, the “Martin Agreement”). Pursuant to the terms of the Martin Agreement, in consideration for Mr. Martin’s services as Chairman, he receives a consulting fee of $3,000 per month, accruing from the Effective Date. The consulting fee will be reviewed by the Compensation Committee of the Company on an annual basis. For so long as Mr. Martin remains a member of the Company’s Board of Directors
(“Board”), he will also be eligible for any compensation program in place for directors. Currently, the Company’s Board receives a monthly stipend of $1,000.

Mr. Martin agreed to be bound by certain confidentiality and indemnification provisions, as well as a full and final release of any and all obligations under a prior employment agreement. The engagement may be terminated at any time, with or without cause and with or without notice.

19

J. Roland Vetter

On July 1, 2010, the Company entered into a Consulting Agreement (the “Vetter Agreement”) with J. Roland Vetter, whereby Mr. Vetter is to provide services to the Company in his role as Chief Financial Officer (“CFO”) of the Company. Mr. Vetter was appointed as the Company’s CFO effective as of February 1, 2010.

As compensation for providing such consulting services in his capacity as CFO, the Company agreed to pay Mr. Vetter $2,500 per month as well as provide a $10,000 payment upon signing the Vetter Agreement, such compensation to be reviewed annually by the Company’s Compensation Committee. The Vetter Agreement has a 2-year term with automatic 1-year renewal periods unless earlier terminated upon notice or for cause as provided in the Vetter Agreement, and allows for Mr. Vetter to participate in certain Company incentive and benefit plans.

Effective July 1, 2011, the Compensation Committee approved an increase in Mr. Vetter’s annual compensation to $96,000 per year.

NOTE 15 – LEGAL MATTERS

On January 24, 2012, the Company received a Notice of Default and Acceleration from Waterton Global Value, L.P. (previously defined as “Waterton”) under that certain Senior Secured Gold Stream Credit Agreement dated September 26, 2011 (see Note 7) between the Company and Waterton (previously defined as the “Gold Stream Facility”) declaring the entire unpaid principal balance, plus fees, interest and costs, in the alleged aggregate amount of $8,311,034, immediately due and payable, and subsequently the Company received supplemental Notices of Default as well as a Notice of Disposition of Collateral (collectively, the “Notices”). The Company refuted each
initial assertion of default.

On April 30, 2012, the Company’s 30% interest in the Mineral Ridge LLC was foreclosed upon by Waterton and sold at auction. The Company’s interest in the Mineral Ridge LLC was sold to Waterton for a credit bid of $9,035,321, which amount was claimed by Waterton as owed by the Company under the Gold Stream Facility, including penalties and interest.

Through April 30, 2012, the date of the foreclosure and sale, the Company had borrowed $6,000,000 in principal, with proceeds used to make payments under the Mina Santa Rosa acquisition agreement, and had accrued interest expense of $209,912.

The facts and circumstances surrounding the alleged default that resulted in the foreclosure and sale of the Company’s interest in the Mineral Ridge LLC were matters in dispute and the subject of a suit filed on March 30, 2012 by the Company in the Second Judicial Court of Nevada in and for the County of Washoe, against Waterton and Scorpio. On July 11, 2012, the Company announced that it, Waterton, and Scorpio entered into a settlement agreement to discontinue the litigation and to fully release each other from any claims or possible claims relating to the litigation.

Further, on April 4, 2012, the Company filed a request for arbitration with the International Chamber of Commerce against Silver Global, requesting relief in the form of a declaration of rights of the parties under the Santa Rosa Acquisition Agreement and Trust Agreement, each dated as of September 16, 2011, as well as an injunction against Silver Global taking action to effect the rights, titles and interests of the Company and seeking an award of damages. It was the Company’s position that there had been no breach of the Santa Rosa Acquisition Agreement.

20

As further discussed in Note 3, in July 2012, the Company entered into a Rescission and Release Agreement, as amended, with Silver Global and the JV Company (collectively the “Parties”) whereby the Parties agreed to resolve their disputes and rescind the Santa Rosa Acquisition Agreement. Concurrent with the execution of the Rescission Agreement and the receipt of the first scheduled payment by the Company of $350,000 on August 8, 2012, the arbitration proceedings previously filed by the Company against Silver Global and pending before the International Chamber of Commerce were dismissed, without prejudice.

NOTE 16 – SUPPLEMENTAL STATEMENT OF CASH FLOWS INFORMATION

During the nine months ended September 30, 2012 and 2011, the Company made no cash payments for income taxes.

During the nine months ended September 30, 2012 and 2011, the Company made cash payments for interest of $35,928 and $3,388, respectively.

During the nine months ended September 30, 2012, the Company had the following non-cash financing and investing activities:

·

Increased marketable securities and increased other comprehensive income by $139,200.

·

Increased common stock and decreased additional paid-in capital by $2,481.

During the nine months ended September 30, 2011, the Company had the following non-cash financing and investing activities:

There were no new accounting pronouncements issued during the nine months ended September 30, 2012 and through the date of the filing of this report that the Company believes are applicable to or would have a material impact on the consolidated financial statements of the Company.

21

NOTE 18 – SUBSEQUENT EVENTS

Santa Rosa Rescission and Release Agreement

In October 2012, Santa Rosa returned to the Company the 25,000,001 shares of the Company’s common stock pursuant to the Santa Rosa Rescission and Release Agreement (Note 3). It is the intent of the Company to cancel these outstanding common shares.

Sale of Drill Rig

In October 2012, the Company sold its drill rig in anticipation of its expectation to utilize contract drilling services to advance its portfolio of mining properties in the U.S. and abroad.

22

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD LOOKING STATEMENTS

Except for historical information, the following Management’s Discussion and Analysis contains forward-looking statements based upon current expectations that involve certain risks and uncertainties. Such forward-looking statements include statements regarding, among other things, (a) our estimates of mineral reserves and mineralized material, (b) our growth strategies, (c) our expectations regarding property acquisitions or exploration plans, (d) anticipated trends in our industry, (e) our future financing plans, (f) our anticipated needs for working capital, (g) our lack of operational experience and (h) the benefits related to ownership of our
common stock. Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied by any forward-looking statements. These statements may be found under “Management’s Discussion and Analysis of Financial Condition” as well as in this
Report generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” described in our Annual Report on Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commission (the “SEC”) and matters described in this Report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Report will in fact occur as projected.

OVERVIEW

Golden Phoenix Minerals, Inc. (the “Company,” “Golden Phoenix,” “we,” “us” or “our”) was formed in Minnesota on June 2, 1997. On May 30, 2008, we reincorporated in Nevada. We are a mineral exploration and development company specializing in acquiring and consolidating mineral properties with potential production and future growth through exploration discoveries. Our current growth strategy is focused on the expansion of our operations through the development of mineral properties into joint ventures and royalty mining projects.

We own the Northern Champion molybdenum property in Ontario, Canada, and four gold and base metal properties in the Shining Tree District in Ontario, Canada. We also own the Adams Mine and Duff Claim Block near Denio, Nevada; however, we are looking into a potential ownership dispute as further described in Note 3 to our accompanying condensed consolidated financial statements. We have entered into agreements to acquire: an 80% interest in the Vanderbilt Silver and Gold Project and the Coyote Fault Gold and Silver Project, both located adjacent to the Mineral Ridge property near Silver Peak, Nevada; an 80%
interest in claims that are an extension to the Coyote Fault property (referred to as the “Coyote Extension”); and a 100% interest in five gold and molybdenum properties in Peru.

On April 30, 2012, our 30% interest in the Mineral Ridge LLC was foreclosed upon by our senior, secured lender, Waterton Global Value, L.P. (previously defined as “Waterton”), and sold at auction. As a result, we no longer hold an interest in the Mineral Ridge LLC. The facts and circumstances that resulted in the foreclosure and sale of our interest in the Mineral Ridge LLC were matters in dispute and the subject of litigation filed by the Company against Waterton and Scorpio Gold Corporation, a participant in the Mineral Ridge Joint Venture. On July 11, 2012, the Company announced that it, Waterton, and Scorpio Gold Corporation entered into a settlement
agreement to discontinue the litigation and to fully release each other from any claims or possible claims relating to the litigation.

23

During 2011, we entered into an agreement to acquire a 60% interest in the Mina Santa Rosa gold mine located in Panama. However, we recently entered into rescission and release agreements to terminate this agreement and to receive repayment of substantially all of the consideration paid in shares of our common stock and cash in consideration for the ultimate return of the 15% the Company previously earned into in the Panama joint venture entity.

On April 14, 2011, we, through a wholly-owned subsidiary, Ra Minerals, Inc. (“Ra Minerals”), closed the acquisition of 100% of the issued and outstanding shares of Ra Resources Ltd., a corporation incorporated under the laws of the Province of Ontario. Through this acquisition, we acquired a 100% interest in four gold and base metal properties within the Shining Tree Mining District in Eastern Ontario, Canada. The historic Shining Tree area is currently undergoing a resurgence of exploration where five other companies have been preparing and engaging in drill programs. The accompanying condensed consolidated financial statements of the Company include the
accounts of the Company and the accounts of Ra Minerals from April 14, 2011 forward. All intercompany accounts and balances have been eliminated in consolidation.

Further, in June 2012, the Company’s Board approved the creation of an Interim Governing Board (previously defined as the “IGB”) to temporarily absorb the position of Chief Executive Officer, in an effort to divide responsibilities and roles and utilize the collective strengths and expertise among the Board. The IGB is comprised of four members from the Golden Phoenix Board including: Donald Gunn, John Di Girolamo, Jeffrey Dahl and Thomas Klein. Donald Gunn serves as Chair of the IGB.

GOING CONCERN UNCERTAINTY

The consolidated financial statements of the Company are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has a history of operating losses since its inception in 1997, and has an accumulated deficit of $61,361,336 and a total stockholders’ deficit of $2,676,086 at September 30, 2012. A significant portion of these deficits resulted from our accounting policy of expensing exploration mineral property acquisition costs, including costs expended to acquire interests in joint
ventures with mineral properties in the exploration and evaluation stage, due to the uncertainty as to the recoverability of these costs. Our only source of operating revenues for the past several months has been the occasional rental of drilling equipment. Currently, none of our mineral property prospects have proven or probable reserves. We will require additional capital to fund our operations and to pursue mineral property development opportunities with our existing properties and other prospects.

As more fully described in the Notes to Condensed Consolidated Financial Statements and elsewhere in this quarterly report, we currently own or have entered into options and agreements for the acquisition of various mineral properties. None of these mineral properties currently have proven or probable reserves. We will be required to raise significant additional capital to complete the acquisition of the interests in and further the exploration, evaluation and development of each of these mineral properties. There can be no assurance that we will be successful in raising the required capital or that any of these mineral properties will ultimately attain a successful
level of operations.

In September 2011, we entered into a Gold Stream Facility, secured by substantially all assets of the Company, with Waterton. On January 24, 2012, we received a Notice of Default and Acceleration, and subsequently received supplemental Notices of Default, and a Notice of Disposition of Collateral from Waterton under the Gold Stream Facility. We refuted each assertion of default. Through April 30, 2012, the Company had borrowed a net $6,000,000 from the Gold Stream Facility. On April 30, 2012, our 30% interest in the Mineral Ridge LLC was foreclosed upon by Waterton and sold at a
public auction, at which the only bidder present was Waterton. Our interest in the Mineral Ridge LLC was sold to Waterton and indebtedness to Waterton with a total book value of $6,209,912 was extinguished.

24

Effective July 23, 2012 and subsequently amended effective July 30, 2012, we entered into a Rescission Agreement, with Silver Global and Golden Phoenix Panama, S.A. (previously defined as the “JV Company”) whereby the Parties agreed to resolve outstanding disputes and rescind the Definitive Acquisition Agreement entered into on September 16, 2011 to develop the Santa Rosa mining project in Panama (the “Santa Rosa Acquisition Agreement” as previously defined). In accordance with the terms of the Rescission Agreement, Silver Global is to return and pay to the Company a total of $4,100,000 in scheduled payments over twelve months, subject to a discount of $750,000 as
consideration for timely payments, and return to the Company for cancellation 25,000,001 shares of the Company’s common stock. We are to transfer our 15% ownership interest in the JV Company to Silver Global in tranches concurrent with scheduled payments. We received the first payment from Silver Global of $350,000 and returned 5% of the Company’s 15% interest in the JV Company; however, there can be no assurance that we will receive the remaining payments from Silver Global as scheduled in the Rescission Agreement. In the event of any default in the scheduled payments, the Company will maintain any unpaid portion of its shares in the JV Company. We received the 25,000,001 shares of our common stock from Silver Global in October 2012.

Because of the negative impact on our fund raising efforts of the foreclosure and sale of our interest in the Mineral Ridge LLC and the rescission of our mining joint venture in Panama, capital has generally not been available to continue mineral property exploration and evaluation activities and fund operations in the current year. There can be no assurance that we will be successful in our efforts to obtain financing, or that we will be successful in our efforts to continue to raise capital at favorable rates or at all. If we are unable to raise sufficient capital to pay our obligations, or we and our joint venture partners are unable to successfully complete the development
of current mineral projects and obtain profitable operations and positive operating cash flows, we may be forced to scale back our mineral property acquisition and development plans or to significantly reduce or terminate operations and file for reorganization or liquidation under the bankruptcy laws. These factors together raise doubt about our ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make a variety of estimates and assumptions that affect: (1) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and (2) the reported amounts of revenues and expenses during the reporting periods covered by the financial statements. Our management routinely makes judgments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the future resolution of the
uncertainties increases, these judgments become even more subjective and complex. We have identified certain accounting policies that are most important to the portrayal of our current financial condition and results of operations. Our significant accounting policies are disclosed in Note 2 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2011. Several of these critical accounting policies are as follows:

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Marketable Securities

Marketable securities consist of investments in common stock of two publicly held mining companies. The marketable securities are stated at market value, with market value based on market quotes. Unrealized gains and losses resulting from changes in market value are recorded as other comprehensive income, a component of stockholders’ equity in our consolidated balance sheet. Realized gains and losses resulting from the sale or disposition of marketable securities are reflected in net income or loss for the period. Estimated impairment losses that are determined to be other-than-temporary are included in
net income or loss for the period.

Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization are calculated using the straight-line method over estimated useful lives ranging from 3 to 7 years.

Mine development costs are capitalized after proven and probable reserves have been identified. Amortization of mine development costs will be calculated using the units-of-production method over the expected life of the operation based on the estimated proven and probable reserves. As of September 30, 2012 and December 31, 2011, we had no mineral properties with proven or probable reserves and no amortizable mine development costs.

Mineral Property Acquisition Costs

Mineral property acquisition costs are recorded at cost and capitalized where an evaluation of market conditions and other factors imply the acquisition costs are recoverable. Such factors may include the existence or indication of economically mineable reserves, a market for the subsequent sale of the mineral property, the stage of exploration and evaluation of the property, historical exploration or production data, and the geographic location of the property. Once a determination has been made that a mineral property has proven or probable reserves that can be produced profitably, depletion of the capitalized acquisition costs will be computed at the commencement of
commercial production on the units-of-production basis using estimated proven and probable reserves. As of September 30, 2012 and December 31, 2011, we had no capitalized mineral property acquisition costs.

Where an evaluation of market conditions and other factors results in uncertainty as to the recoverability of exploration mineral property acquisition costs, the costs are expensed as incurred and included in exploration and evaluation expenses.

Evaluation expenses relating to the determination of the technical feasibility and commercial viability of a mineral resource, including determining volume and grade of deposits, examining and testing extraction methods, metallurgical or treatment processes, surveying transportation and infrastructure requirements and conducting market and finance studies are expensed as incurred.

26

Mineral Property Development Costs

Mineral property development costs relate to establishing access to an identified mineral reserve and other preparations for commercial production, including infrastructure development, sinking shafts and underground drifts, permanent excavations, and advance removal of overburden and waste rock.

When it is determined that commercially recoverable reserves exist and a decision is made by management to develop the mineral property, mineral property development costs are capitalized and carried forward until production begins. The capitalized mineral property development costs are then amortized using the units-of-production method using proven and probable reserves as the mineral resource is mined.

Proven and Probable Ore Reserves

On a periodic basis, management reviews the reserves that reflect estimates of the quantities and grades of metals at our mineral properties which management believes can be recovered and sold at prices in excess of the total cost associated with mining and processing the mineralized material. Management’s calculations of proven and probable ore reserves are based on, along with independent consultant evaluations, in-house engineering and geological estimates using current operating costs, metals prices and demand for the metals. Periodically, management obtains external determinations of reserves.

Reserve estimates will change as existing reserves are depleted through production, as well as changes in estimates caused by changing production costs and/or metals prices. Reserves may also be revised based on actual production experience once production commences. Declines in the market price of metals, as well as increased production or capital costs or reduced recovery rates, may render ore reserves uneconomical to exploit. Should that occur, restatements or reductions in reserves and asset write-downs in the applicable accounting periods may be required. Reserves should not be interpreted as assurances of mine life or of the profitability of current
or future operations. No assurance can be given that the estimate of the amount of metal or the indicated level of recovery of these metals will be realized.

We currently have no proven or probable ore reserves.

Closure, Reclamation and Remediation Costs

Current laws and regulations require certain closure, reclamation and remediation work to be done on mineral properties as a result of exploration, development and operating activities. We periodically review the activities performed on our mineral properties and make estimates of closure, reclamation and remediation work that will need to be performed as required by those laws and regulations and make estimates of amounts that are expected to be incurred when the closure, reclamation and remediation work is expected to be performed. Future closure, reclamation and environmental related expenditures are difficult to estimate in many circumstances due to the early stages of
investigation, uncertainties associated with defining the nature and extent of environmental contamination, the uncertainties relating to specific reclamation and remediation methods and costs, application and changing of environmental laws, regulations and interpretation by regulatory authorities, the country where the project is located, and the possible participation of other potentially responsible parties.

At September 30, 2012 and December 31, 2011, we had no mining projects which had advanced to the stage where closure, reclamation and remediation costs were required to be accrued in our consolidated financial statements.

27

Property Evaluations and Impairment of Long-Lived Assets

We review and evaluate the carrying amounts of our mineral properties, capitalized mineral property development costs and related buildings and equipment, and other long-lived assets when events or changes in circumstances indicate that the carrying amount may not be recoverable. Estimated future net cash flows, on an undiscounted basis, from a property or asset are calculated using estimated recoverable minerals (considering current proven and probable reserves and mineralization expected to be classified as reserves where applicable); estimated future mineral price realization (considering historical and current prices, price trends and related factors); operating, capital and
reclamation costs; and other factors beyond proven and probable reserves such as estimated market value for the property in an arms-length sale. Reduction in the carrying value of property, plant and equipment, or other long-lived assets, with a corresponding charge to earnings, are recorded to the extent that the estimated future net cash flows are less than the carrying value.

Estimates of future cash flows are subject to risks and uncertainties. It is reasonably possible that changes in circumstances could occur which may affect the recoverability of the Company’s properties and long-lived assets.

Debt Issuance Costs

Costs incurred with closing the Gold Stream Facility with Waterton and with subsequent loan advances are capitalized and amortized to interest expense through the maturity date of each advance or the life of the outstanding indebtedness.

Revenue Recognition

Revenue from the sale of precious metals is recognized when title and risk of ownership passes to the buyer and the collection of sales proceeds is assured.

Revenue from the occasional rental of drilling equipment is recognized when the agreed upon rental period is completed and the collection of rental proceeds is assured.

Income Taxes

We recognize a liability or asset for deferred tax consequences of all temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years when the reported amounts of the assets and liabilities are recovered or settled. Deferred tax items mainly relate to net operating loss carry forwards and accrued expenses. These deferred tax assets or liabilities are measured using the enacted tax rates that will be in effect when the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date. Deferred tax assets are reviewed periodically for recoverability, and valuation allowances are provided when it is more likely than not that some or all of the deferred tax assets may not be realized. As of September 30, 2012 and December 31, 2011, we had fully reduced our net deferred tax assets by recording a 100% valuation allowance.

Stock-Based Compensation and Equity Transactions

In accordance with ASC Topic 718, Compensation – Stock Compensation, we measure the compensation cost of stock options and other stock-based awards issued to employees and directors pursuant to stock-based compensation plans at fair value at the grant date and recognize compensation expense over the requisite service period for awards expected to vest.

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Except for transactions with employees and directors that are within the scope of ASC Topic 718, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. Additionally, in accordance with ASC Topic 505-50, Equity-Based Payments to Non-Employees, we have determined that the dates used to value the transaction are either: (1) the date at which a commitment for performance by the counter party to earn the equity
instruments is established; or (2) the date at which the counter party’s performance is complete.

RECENT ACCOUNTING PRONOUNCEMENTS

There were no new accounting pronouncements issued during the nine months ended September 30, 2012 and through the date of the filing of this report that the we believe are applicable to or would have a material impact on our condensed consolidated financial statements.

RESULTS OF OPERATIONS

Sales

Our only source of operating revenues for the past several months has been the occasional rental of drilling equipment. We have had limited operations in our drilling services division, pending additional funding and project opportunities. During the three months ended September 30, 2012 and 2011, we had rental income of $7,800 and $67,800, respectively. During the nine months ended September 30, 2012 and 2011, we had rental income of $33,700 and $133,400, respectively.

Operating Costs and Expenses

Exploration and evaluation expenses were $84,081 and $3,145,071 for the three months ended September 30, 2012 and 2011, respectively, and $314,283 and $10,286,650 for the nine months ended September 30, 2012 and 2011, respectively. As further discussed under “LIQUIDITY AND CAPITAL RESOURCES,” sources of funding were limited during the three months and nine months ended September 30, 2012. Therefore, the level of exploration and evaluation expenses decreased significantly during this period compared to the same period in the prior year. In addition, the year ended December 31, 2011 was an active year where we
entered into several agreements to acquire interests in exploration mineral properties.

29

Exploration and evaluation expenses were comprised of expenses for the following exploration opportunities:

Three Months Ended

September 30,

Nine Months Ended

September 30,

2012

2011

2012

2011

Mina Santa Rosa

$

-

$

1,250,000

$

64,516

$

1,250,000

Peru Properties

-

1,373,995

-

1,894,721

Molyco

-

-

-

200,000

Mhakari Properties

-

386,089

-

436,089

Shining Tree Mining District

-

47,432

-

6,160,727

North Williams Township

-

-

-

39,055

Other

84,081

87,555

249,767

306,058

Total

$

84,081

$

3,145,071

$

314,283

$

10,286,650

These exploration projects currently do not have proven or probable reserves. More detailed explanations of these mineral properties are provided in Note 3 to our Condensed Consolidated Financial Statements.

General and administrative expenses were $326,970 and $1,004,330 for the three months ended September 30, 2012 and 2011, respectively, and $1,644,959 and $2,907,750 for the nine months ended September 30, 2012 and 2011, respectively. General and administrative expenses include investor relations, salaries and wages of officers and office and accounting personnel, legal and professional fees, outside consulting fees, travel and stock-based compensation expense. As discussed above, our activity entering into agreements for the acquisition of interests in mineral properties decreased during the first three quarters of this year, resulting in a decrease in related general and
administrative expenses including outside consulting fees and travel expenses.

Depreciation and amortization expense is not currently material to our consolidated financial statements and was $11,769 and $22,229 for the three months ended September 30 2012 and 2011, respectively, and $46,715 and $60,527 for the nine months ended September 30, 2012 and 2011, respectively.

We incurred no cost of mining operations during the three months ended September 30, 2012 and 2011 and the nine months ended September 30, 2012. Cost of mining operations was $78,170 for the nine months ended September 30, 2011, and consisted of costs incurred for the initial preparation, testing and milling of material from the Porvenir tungsten molybdenum stockpile. We recently closed agreements that, subject to finalization of transfer agreements and consideration, will allow us to obtain a 100% interest in this project in Peru and allow us to again commence operations as funding permits.

Other Income (Expense)

Interest and other income currently is currently not material to our consolidated financial statements, and was $124 and $4 for the three months ended September 30, 2012 and 2011, respectively, and $1,410 and $5,392 for the nine months ended September 30, 2012 and 2011, respectively.

Interest expense was $7,928 and $100,430 for the three months ended September 30, 2012 and 2011, respectively, and $517,701 and $118,334 for the nine months ended September 30, 2012 and 2011, respectively. The increase in interest expense on a year-to-date basis in the current year was due primarily to the increase in debt from our senior, secured Gold Stream Facility that we entered into in September 2011 and which was repaid in April 2012. Because of this repayment, our interest expense for the quarter ended September 30, 2012 decreased from our interest expense for the quarter ended September 30,
2011.

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We reported a foreign currency gain of $13,306 in the three months ended September 30, 2012 and a foreign currency loss of $4,149 in the three months ended September 30, 2011, and a foreign currency loss of $58,661 and $663 in the nine months ended September 30, 2012 and 2011, respectively. The amount of the foreign currency gain or loss will fluctuate from period to period depending on the balance maintained in our Canadian bank account, our foreign investments, and changes in foreign exchange rates.

We also reported immaterial amounts of gain on disposition of property and equipment. For the three months ended September 30, 2012, we reported a gain of $13,516, and reported gains of $13,077 and $50 for the nine months ended September 30, 2012 and 2011, respectively.

We estimated an impairment loss on our marketable securities of $302,650 that we determined was other-than-temporary, and reported this loss for the three months and nine months ended September 30, 2012.

For the nine months ended September 30, 2012, we reported a gain on disposition of our interest in the Mineral Ridge LLC of $6,209,912, representing the total principal and accrued interest payable balance of our senior, secured indebtedness that was extinguished pursuant to the foreclosure and sale of this interest in LLC in April 2012.

In July 2012, we entered into a Rescission and Release Agreement, as amended, with Silver Global and the JV Company whereby the parties agreed to resolve their disputes and rescind the Santa Rosa Acquisition Agreement. We reported a gain on rescission of joint venture agreement of $843,695 in the three months and nine months ended September 30, 2012, comprised of the first scheduled payment by the Company of $350,000, net of certain fees, and the extinguishment of the outstanding loan for $500,000 payable to Silver Global.

We reported a gain on extinguishment of debt of $10,677 during the three months ended September 30, 2011 and of $30,677 during the nine months ended September 30, 2011.

LIQUIDITY AND CAPITAL RESOURCES

We have a history of operating losses since our inception in 1997, and had an accumulated deficit of $61,361,336 and a total stockholders’ deficit of $2,676,086 at September 30, 2012. At September 30, 2012, we had current assets of $616,654 and current liabilities of $3,161,411, resulting in a working capital deficit of $2,544,757. Included in current assets at September 30, 2012 were cash of $303,054 and marketable securities of $302,650. The marketable securities are comprised of investments in the common stock of two public mining companies with limited operations and without an active market for the trading of their stock.

On January 24, 2012, we received a Notice of Default and Acceleration, and subsequently received supplemental Notices of Default and a Notice of Disposition of Collateral from Waterton under our Gold Stream Facility, or our senior, secured note payable. We refuted all assertions of default. On April 30, 2012, our 30% interest in the Mineral Ridge LLC was foreclosed upon by Waterton and sold at a auction. Our interest in the Mineral Ridge LLC was sold to Waterton for a credit bid of $9,035,321, which amount is claimed by Waterton as owed by the Company under the Gold Stream Facility, including
penalties and interest. We recognized a gain on disposition of our interest in the Mineral Ridge LLC of $6,209,912, representing the total principal and accrued interest payable balance of our senior, secured indebtedness that was extinguished pursuant to the foreclosure and sale of our interest in LLC.

31

During 2011, we entered into an agreement to acquire a 60% interest in the Mina Santa Rosa gold mine located in Panama. However, we recently entered into settlement agreements to rescind this agreement and to receive a total of $4,100,000 in scheduled payments over 12 months, subject to a discount of $750,000 as consideration for timely payments and return to us for cancellation 25,000,001 shares of our common stock. We received the first cash payment of $350,000 and the shares of our common stock. There can be no assurance that we will receive further cash payments pursuant to this agreement.

As a result of these developments, our fund raising ability has been hampered, and we have necessarily scaled back the level of activity in the further advancement and development of our mineral property projects and the development of our business plan. Currently, we are largely dependent on the receipt of further cash payments from the rescission agreement to fund our operations.

We currently have no significant operating revenues. As further discussed above, and in the notes to our condensed consolidated financial statements, we have recently entered into agreements resulting in substantial obligations to acquire exploration properties and fund mineral property exploration and evaluation activities. We will be required to raise significant additional capital to complete the acquisition of the interests in and further the exploration, evaluation and development of these mineral properties. There can be no assurance that we will be successful in raising the required capital or that any of these mineral properties will ultimately attain a
successful level of operations. In addition, our general and administrative and support expenses may continue to increase over current levels as we move forward with our planned expansion and development activities.

In July 2012, concurrently with the execution of the settlement agreement with Waterton, we completed a private placement with an institutional investor, consisting of the issuance of six million warrants, to purchase an equivalent number of shares of the Company’s common stock in consideration for a purchase price of $400,000. Two million of the warrants will be exercisable for $0.04 per warrant share and the remaining four million warrants exercisable at $0.08 per warrant share. These warrants are exercisable for a period of five years from date of issuance, through July 10,
2017.

As more fully described in the Notes to Condensed Consolidated Financial Statements, during the year ended December 31, 2011, we incurred indebtedness in connection with the acquisition of interests in mineral properties or settlement agreements to restructure debt or other obligations related to our mineral property development activities.

Sala-Valc S.A.C. Effective as of October 7, 2011, the Company and Sala-Valc S.A.C (“SV”) entered into an Amendment to Mining Asset Purchase and Strategic Alliance Agreement dated September 30, 2011 (the “Amendment”), and a side letter agreement regarding the Amendment (the “Side Amendment,” and together with the Amendment the “Amendments”) in order to amend certain terms, conditions and provisions of a Mining Asset and Strategic Alliance Agreement between the Company and SV dated June 1, 2011.

Pursuant to the Amendments, among other things, the strategic alliance provisions contemplated in the June 1, 2011 agreement were eliminated, resulting in the Company acquiring 100% interest in the mineral properties in Peru. In addition, the obligations due to SV were restructured (subject to and including a net smelter return royalty) to include two promissory notes payable to SV: (i) a convertible note in the principal amount of $500,000, with no interest to accrue thereon, which shall be repaid by conversion into restricted shares of the Company’s common stock, at a conversion price of $0.10 per share,
or 5,000,000 shares, such conversion right to vest as of January 1, 2012 or upon transfer of the Peru Properties, which note shall automatically convert on or before the maturity date of September 30, 2012; and (ii) a convertible note in the amount of $413,223, with no interest to accrue thereon, which shall be repaid by conversion into restricted shares of the Company’s common stock, at a conversion price of $0.10 per share, or 4,132,228 shares, such conversion right to vest as of January 1, 2012 or upon transfer of the Peru Properties, which note shall automatically convert on or before the maturity date of September 30, 2012. We expect the documents necessary to finalize the transfer of the Peru Properties and related vesting of conversion rights as well as resolutions to any remaining pending closing items to be completed in the near term.

32

Molyco. On October 31, 2011, we closed an agreement with Pinnacle Minerals Corporation (“Pinnacle”) and Salwell International, LLC (“Salwell”) pursuant to which we acquired Pinnacle’s 32.5% membership interest in Molyco, LLC (“Molyco”). Molyco owns or controls approximately 30,000 tons of the Molybdenum stockpile comprising a portion of the Porvenir property in Peru. The remaining interest in Molyco is to be transferred to the Company by Salwell as part of our agreement with SV, as described
above. Pursuant to this agreement, we paid Pinnacle a cash payment of $250,000 and issued two non-interest bearing promissory notes as follows:

(i) Note 1 in the amount of $250,000 with two monthly payments of $15,000 in each of November 2011 and December 2011; one monthly payment of $30,000 in January 2012; two monthly payments of $20,000 in each of February 2012 and March 2012; and increasing to $30,000 per month thereafter until payment in full (with a balance of $190,000 at September 30, 2012); and

(ii) Note 2 in the amount of $250,000, such note to be convertible, and repaid based on conversion into 1,000,000 shares of Golden Phoenix common stock, which conversion right shall vest 12 months from the closing, subject to a first right of refusal of the Company to repurchase some or all of the shares at a per share price of $0.25, which repurchase right shall expire on the maturity date of the note of October 31, 2013.

Net Cash Provided By or Used In Operating, Investing and Financing Activities

During the nine months ended September 30, 2012, we used net cash of $670,589 in operating activities primarily as a result of net non-cash expenses of $5,979,026, partially offset by our net income of $4,216,825, a decrease in prepaid expenses and other current assets of $83,524, and increases in accounts payable of $795,589 and accrued liabilities of $212,499.

By comparison, in the nine months ended September 30, 2011, we used net cash of $3,530,774, primarily as a result of our net loss of $13,090,290, partially offset by net non-cash expenses of $9,231,166, an increase in prepaid expenses and other current assets of $64,387 and increases in accounts payable of $126,008 and accrued liabilities of $137,955.

During the nine months ended September 30, 2012, we had net cash proved by investing activities of $29,515, comprised of proceeds from the disposition of property and equipment of $32,250, partially offset by the purchase of property and equipment of $2,735. During the nine months ended September 30, 2011, we had net cash used in investing activities of $38,131, comprised of the purchase of property and equipment of $38,181, partially offset by proceeds from the disposition of property and equipment of $50.

33

During the nine months ended September 30, 2012, net cash provided by financing activities was $789,521, comprised of net proceeds from the sale of common stock of $412,500 and proceeds from the issuance of warrants of $420,000, partially offset by payments of notes payable and long-term debt of $42,979. During the nine months ended September 30, 2011, net cash provided by financing activities was $2,054,176, comprised of net proceeds from the sale of common stock of $645,000, proceeds from the exercise of warrants of $105,000 and proceeds from notes payable of $2,750,000, partially offset by payment of debt issuance costs of $312,372, payments of notes payable and long-term debt of
$1,053,648 and the purchase of treasury stock of $79,804.

Off-Balance Sheet Arrangements

We lease drilling equipment at a monthly payment of $14,525 through January 2013 and office space at a monthly payment of $1,600 through September 2013. In addition, we lease other office space under short-term, month-to-month lease arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not Applicable.

Item 4T. Controls and Procedures

Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our principal executive officer and chief financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2012. Based on that evaluation, our principal executive officer and chief financial officer concluded that the disclosure controls and procedures employed at the Company were effective to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

Change in Internal Control Over Financial Reporting

During the nine months ended September 30, 2012, we implemented procedures to eliminate a material weakness in our internal control over financial reporting identified during the audit of our consolidated financial statements for the year ended December 31, 2011. We have placed emphasis on quarterly closing procedures, including timely internal review and discussion of accounting and financial reporting consequences of material contracts and agreements and enhanced review of all schedules and account analyses by experienced accounting department personnel or independent consultants.

There was no change in our internal control over financial reporting during the fiscal quarter ended September 30, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

34

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Silver Global, S.A. – Effective July 23, 2012 and subsequently amended effective July 30, 2012, the Company entered into a Rescission and Release Agreement with Silver Global and the JV Company whereby the parties agreed to resolve their disputes and rescind the Santa Rosa Acquisition Agreement.

In accordance with the terms of the Rescission Agreement, Silver Global is to return and pay to the Company a total of $4,100,000 in scheduled payments over twelve months, subject to a discount of $750,000 as consideration for timely payments, and return to the Company for cancellation 25,000,001 shares of the Company’s common stock. The Company is to transfer its 15% ownership interest in the JV Company to Silver Global in tranches upon receipt of scheduled payments.

Concurrent with the execution of the Rescission Agreement and the receipt of the first payment by the Company of $350,000 on August 8, 2012, the arbitration proceedings previously filed by the Company against Silver Global and pending before the International Chamber of Commerce were dismissed, without prejudice.

In October 2012, the Company received the 25,000,001 shares of its common stock.

Item 1A. Risk Factors

Not Applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Securities

On July 10, 2012, concurrently with the execution of the settlement agreement with Waterton, the Company completed a private placement with an institutional investor, consisting of the issuance of six million warrants, to purchase an equivalent number of shares of the Company’s common stock in consideration for a purchase price of $400,000. Two million of the warrants will be exercisable for $0.04 per warrant share and the remaining four million warrants exercisable at $0.08 per warrant share. These warrants are exercisable for a period of five years from date of issuance, through July 10,
2017.

The issuances of the warrants to purchase common stock to were conducted in reliance upon the exemption from registration requirements provided by Section 4(2) of the Securities Act of 1933, as amended, and from various similar state exemptions.

** The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section

and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

(1)

Incorporated by reference from Form 10SB12G filed with the SEC on July 30, 1997.

(2)

Incorporated by reference from Form SB-2/A filed with the SEC on June 29, 2007.

(3)

Incorporated by reference from Form 8-K filed with the SEC on June 5, 2008.

(4)

Incorporated by reference from Exhibit A to Exhibit 10.1 of Form 8-K filed with the SEC on April 25, 2007.

(5)

Incorporated by reference from Form 8-K filed with the SEC on December 8, 2010.

(6)

Incorporated by reference from Form 8-K filed with the SEC on January 6, 2011.

(7)

Incorporated by reference from Form 8-K filed with the SEC on March 7, 2012.

36

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

1. I have reviewed this Quarterly Report of Golden Phoenix Minerals, Inc. on Form 10-Q for the period ending September 30, 2012;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

1. I have reviewed this Quarterly Report of Golden Phoenix Minerals, Inc. on Form 10-Q for the period ending September 30, 2012;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

In connection with the Quarterly Report of Golden Phoenix Minerals, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Donald Gunn, Chief Executive Officer, and J. Roland Vetter, Chief Financial Officer, on the date indicated below, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date: November 14, 2012

By: /s/ Donald Gunn

Donald Gunn

President, Chairman of Interim Governing Board

(Principal Executive Officer)

Date: November 14, 2012

By: /s/ J. Roland Vetter

J. Roland Vetter

Chief Financial Officer

(Principal Accounting and Financial Officer)

A signed original of this written statement required by Section 906, or other document authentications, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Golden Phoenix Minerals, Inc. and will be retained by Golden Phoenix Minerals, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.